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NYSE:

SCHW

"During the first quarter we took the opportunity to bolster our capital flexibility through a cost-effective, non-dilutive preferred stock offering"

SAN FRANCISCO--(BUSINESS WIRE)--The Charles Schwab Corporation announced today that its net income was
$195 million for the first quarter of 2012, up 20% from $163 million for
the fourth quarter of 2011, and down 20% from $243 million for the
year-earlier quarter.

Three Months Ended

--March 31,--

%

Financial Highlights

2012

2011

Change

Net revenues (in millions)

$

1,189

$

1,207

(1

)%

Net income (in millions)

$

195

$

243

(20

)%

Diluted earnings per share

$

.15

$

.20

(25

)%

Pre-tax profit margin

26.3

%

32.6

%

Return on stockholders’ equity (annualized)

10

%

15

%

President and CEO Walt Bettinger said, “The power of our ‘through
clients’ eyes’ strategy helped us deliver strong results in the first
quarter. Our client metrics included $26.9 billion in core net new
assets, the highest since the first quarter of 2008. Clients also opened
240,000 new brokerage accounts during the quarter, and net new
enrollments in our retail advisory offerings totaled $2.7 billion,
bringing overall advised balances to $118.4 billion at month-end March,
up 7% from a year ago. We finished the quarter serving a record
$1.83 trillion in total client assets, 8.6 million active brokerage
accounts, 801,000 banking accounts, and 1.52 million corporate
retirement plan participants.”

“Both interest rates and equity market valuations picked up during the
first quarter before declining thus far in April,” Mr. Bettinger noted.
“The improved first quarter environment and our ongoing success in
building stronger client relationships helped revenues grow 7%
sequentially, with increases in all three major categories. Our ongoing
expense discipline limited sequential growth in costs to 2%, and our
pre-tax profit margin improved by nearly 4 percentage points from the
fourth quarter of 2011 to 26.3%.”

Mr. Bettinger concluded, “Our momentum in expanding Schwab’s client
service capabilities continues unabated. We are leveraging last year’s
accelerated spending with a reduced but still significant project budget
this year to drive a number of initiatives to completion and into
clients’ hands. Already in 2012, we’ve launched Schwab Index Advantage™,
our unique index-based 401(k) offering; bolstered our mortgage lending
program with Quicken Loans as our new service provider; and added three
new platforms to our integrated technology initiative for independent
advisors. These are a few of the latest steps in Schwab’s continuing
tradition of finding a better way to serve investors – a tradition that
helps our full-service, high-value brokerage model resonate with clients
and supports individual investor loyalty scores that are the highest
we’ve ever recorded.”

CFO Joe Martinetto said, “Easing environmental headwinds immediately
allow the ongoing growth in our client base to be reflected in the
company’s financial performance. First quarter 2012 asset management and
administration fees, net interest revenue and trading revenue were 6, 10
and 4% higher, respectively, than the preceding period. Reflecting the
company’s operating leverage and earnings power, net income rose by 20%.
Overall, revenues were right where we expected them to be given the
environment, and our expenses are on track with our 2012 plan. By
carefully balancing our spending against environmental conditions, we
are poised to deliver both expanded client service capabilities and
improving revenues and earnings throughout 2012 if interest rates at
least stabilize.”

“During the first quarter we took the opportunity to bolster our capital
flexibility through a cost-effective, non-dilutive preferred stock
offering,” Mr. Martinetto noted. “We are positioned to support
potentially strong balance sheet growth in 2012 as our client
initiatives drive ongoing business momentum and we strive to optimize
net interest revenue in a volatile environment.”

Business highlights for the first quarter (data
as of quarter-end unless otherwise noted):

Investor Services

Net new accounts for the quarter totaled approximately 44,000, up 19%
year-over-year. Total accounts reached 6.1 million as of March 31,
2011, up 9% year-over-year.

Opened a second independent branch, part of the company’s franchising
initiative designed to make financial advice and guidance more
accessible in local communities across the country.

Launched the newly expanded Learning Center on schwab.com, making it
easier and more intuitive for clients to find the education resources
they need.

Institutional Services

Advisor Services

Launched three technology platforms as part of the Schwab Intelligent
Integration™ initiative – Schwab Openview Integrated Office™, a
turnkey solution, and two versions of Schwab Openview Gateway™, which
take a flexible, open-architecture approach – to enable data
integration between Schwab systems and those of third-party technology
providers.

Announced support for The Depository Trust & Clearing Corporation’s
Alternative Investment Products service. This service is expected to
improve industry standardization for the custody and trading of
alternative investments.

This press release contains forward looking statements relating to the
ongoing growth of the company’s client base; the impact of the easing of
environmental headwinds on the company’s financial performance; the
company’s delivery of expanded client service capabilities and improving
revenues and earnings; strong balance sheet growth; and net interest
revenue. Achievement of these expectations is subject to risks and
uncertainties that could cause actual results to differ materially from
the expressed expectations. Important factors that may cause such
differences include, but are not limited to, the company’s ability to
attract and retain clients and grow client assets/relationships;
competitive pressures on rates and fees; general market conditions,
including the level of interest rates, equity valuations and trading
activity; the level of client assets, including cash balances; the
company’s ability to develop and launch new products, services and
capabilities in a timely and successful manner; capital needs; level of
expenses; the impact of changes in market conditions on money market
fund fee waivers, revenues, expenses and pre-tax margins; the effect of
adverse developments in litigation or regulatory matters and the extent
of any charges associated with legal matters; any adverse impact of
financial reform legislation and related regulations; and other factors
set forth in the company’s Form 10-K for the period ended December 31,
2011.

About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of
financial services, with more than 300 offices and 8.6 million active
brokerage accounts, 1.52 million corporate retirement plan participants,
801,000 banking accounts, and $1.83 trillion in client assets. Through
its operating subsidiaries, the company provides a full range of
securities brokerage, banking, money management and financial advisory
services to individual investors and independent investment advisors.
Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC,
www.sipc.org),
and affiliates offer a complete range of investment services and
products including an extensive selection of mutual funds; financial
planning and investment advice; retirement plan and equity compensation
plan services; referrals to independent fee-based investment advisors;
and custodial, operational and trading support for independent,
fee-based investment advisors through Schwab Advisor Services. Its
banking subsidiary, Charles Schwab Bank (member FDIC and an Equal
Housing Lender), provides banking and mortgage services and products.
More information is available at www.schwab.com
and www.aboutschwab.com.

THE CHARLES SCHWAB CORPORATION

Consolidated Statements of Income

(In millions, except per share amounts)

(Unaudited)

Three Months Ended

March 31,

2012

2011

Net Revenues

Asset management and administration fees

$

484

$

502

Interest revenue

472

481

Interest expense

(38

)

(45

)

Net interest revenue

434

436

Trading revenue

243

241

Other

46

39

Provision for loan losses

-

(4

)

Net impairment losses on securities (1)

(18

)

(7

)

Total net revenues

1,189

1,207

Expenses Excluding Interest

Compensation and benefits

465

437

Professional services

96

92

Occupancy and equipment

76

71

Advertising and market development

67

60

Communications

58

56

Depreciation and amortization

48

35

Other

66

62

Total expenses excluding interest

876

813

Income before taxes on income

313

394

Taxes on income

(118

)

(151

)

Net Income

$

195

$

243

Weighted-Average Common Shares Outstanding — Diluted

1,273

1,207

Earnings Per Share — Basic

$

.15

$

.20

Earnings Per Share — Diluted

$

.15

$

.20

(1)

Net impairment losses on securities include total
other-than-temporary impairment losses of $2 million and $0 million,
net of $(16) million and $(7) million recognized in other
comprehensive income, for the three months ended March 31, 2012 and
2011, respectively.

See Notes to Consolidated Statements of Income, Financial and
Operating Highlights, and Net Interest Revenue Information.

Total assets as of March 31, 2012, December 31, 2011, and
September 30, 2011, reflect preliminary purchase accounting for
the assignment of fair values to optionsXpress Holdings, Inc.'s
assets and liabilities acquired. Amounts are subject to refinement
as information relative to the closing date fair values becomes
available.

(2)

In the first quarter of 2012, the Company issued and sold 400,000
shares of fixed-to-floating rate non-cumulative perpetual
preferred stock, Series A, $0.01 par value, with a liquidation
preference of $1,000 per share for a total of $400 million.

(3)

Includes all client trades that generate either commission revenue
or revenue from principal markups (i.e., fixed income); also known
as DART.

(4)

Includes eligible trades executed by clients who participate in one
or more of the Company's asset-based pricing relationships.

(5)

Includes all commission free trades, including Schwab Mutual Fund
OneSource® funds and ETFs, and other proprietary products.

See Notes to Consolidated Statements of Income, Financial and
Operating Highlights, and Net Interest Revenue Information.

THE CHARLES SCHWAB CORPORATION

Net Interest Revenue Information

(In millions)

(Unaudited)

Three Months Ended March 31,

2012

2011

Average

Balance

Interest

Revenue/

Expense

Average

Yield/

Rate

Average

Balance

Interest

Revenue/

Expense

Average

Yield/

Rate

Interest-earning assets:

Cash and cash equivalents

$

6,246

$

4

0.26

%

$

4,955

$

3

0.25

%

Cash and investments segregated

26,847

10

0.15

%

23,191

14

0.24

%

Broker-related receivables (1)

315

-

0.09

%

373

-

0.16

%

Receivables from brokerage clients

10,200

106

4.18

%

10,335

117

4.59

%

Securities available for sale (2)

36,197

145

1.61

%

25,016

106

1.72

%

Securities held to maturity

14,972

99

2.66

%

17,138

140

3.31

%

Loans to banking clients

9,864

79

3.22

%

9,009

75

3.38

%

Loans held for sale

53

1

4.15

%

113

1

3.59

%

Total interest-earning assets

104,694

444

1.71

%

90,130

456

2.05

%

Other interest revenue

28

25

Total interest-earning assets

$

104,694

$

472

1.81

%

$

90,130

$

481

2.16

%

Funding sources:

Deposits from banking clients

$

61,105

$

10

0.07

%

$

50,329

$

17

0.14

%

Payables to brokerage clients

30,560

1

0.01

%

27,055

1

0.01

%

Long-term debt

2,001

27

5.43

%

2,005

27

5.46

%

Total interest-bearing liabilities

93,666

38

0.16

%

79,389

45

0.23

%

Non-interest-bearing funding sources

11,028

10,741

Total funding sources

$

104,694

$

38

0.14

%

$

90,130

$

45

0.20

%

Net interest revenue

$

434

1.67

%

$

436

1.96

%

(1)

Interest revenue was less than $500,000 in the period or periods
presented.

(2)

Amounts have been calculated based on amortized cost.

See Notes to Consolidated Statements of Income, Financial and
Operating Highlights, and Net Interest Revenue Information.

Notes to Consolidated Statements of Income, Financial and
Operating Highlights,

and Net Interest Revenue Information

(Unaudited)

The Company

The consolidated statements of income, financial and operating
highlights, and net interest revenue information include The Charles
Schwab Corporation (CSC) and its majority-owned subsidiaries
(collectively referred to as the Company), including Charles Schwab
& Co., Inc. and Charles Schwab Bank. Certain prior year amounts have
been reclassified to conform to the 2012 presentation. The
consolidated statements of income, financial and operating
highlights, and net interest revenue information should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2011.

Includes various asset based fees, such as trust fees, 401k record
keeping fees, and mutual fund clearing and other service fees.

THE CHARLES SCHWAB CORPORATION

Growth in Client Assets and Accounts

(Unaudited)

Q1-12 % Change

2012

2011

vs.

vs.

First

Fourth

Third

Second

First

(In billions, at quarter end, except as noted)

Q1-11

Q4-11

Quarter

Quarter

Quarter

Quarter

Quarter

Assets in client accounts

Schwab One®, other cash equivalents and deposits from
banking clients

18

%

2

%

$

98.8

$

96.4

$

90.9

$

86.5

$

83.7

Proprietary funds (Schwab Funds® and Laudus Funds®):

Money market funds

1

%

(3

%)

154.4

159.8

155.5

152.0

152.2

Equity and bond funds

(6

%)

20

%

45.8

38.2

34.3

49.6

48.9

Total proprietary funds

-

1

%

200.2

198.0

189.8

201.6

201.1

Mutual Fund Marketplace®(1)

Mutual Fund OneSource®

-

11

%

219.5

198.6

187.9

220.8

219.7

Mutual fund clearing services

197

%

22

%

127.0

104.2

98.6

43.7

42.8

Other third-party mutual funds

9

%

9

%

334.1

305.9

290.4

314.2

307.7

Total Mutual Fund Marketplace

19

%

12

%

680.6

608.7

576.9

578.7

570.2

Total mutual fund assets

14

%

9

%

880.8

806.7

766.7

780.3

771.3

Equity and other securities (1)

9

%

13

%

685.0

607.9

552.9

624.5

631.0

Fixed income securities

5

%

1

%

179.4

176.9

176.4

175.1

171.5

Margin loans outstanding

(1

%)

3

%

(10.5

)

(10.2

)

(10.5

)

(10.9

)

(10.6

)

Total client assets

11

%

9

%

$

1,833.5

$

1,677.7

$

1,576.4

$

1,655.5

$

1,646.9

Client assets by business

Investor Services

5

%

8

%

$

753.3

$

697.9

$

655.4

$

711.6

$

714.8

Advisor Services

7

%

8

%

735.9

679.0

640.1

697.8

688.6

Other Institutional Services

41

%

14

%

344.3

300.8

280.9

246.1

243.5

Total client assets by business

11

%

9

%

$

1,833.5

$

1,677.7

$

1,576.4

$

1,655.5

$

1,646.9

Net growth in assets in client accounts (for the quarter
ended)

Net new assets

Investor Services (2)

4

%

11

%

$

5.9

$

5.3

$

11.6

$

2.0

$

5.7

Advisor Services

(11

%)

37

%

12.6

9.2

10.6

10.6

14.2

Other Institutional Services (3)

N/M

191

%

20.4

7.0

63.8

2.8

3.1

Total net new assets

69

%

81

%

38.9

21.5

86.0

15.4

23.0

Net market gains (losses)

137

%

46

%

116.9

79.8

(165.1

)

(6.8

)

49.4

Net growth (decline)

115

%

54

%

$

155.8

$

101.3

$

(79.1

)

$

8.6

$

72.4

New brokerage accounts (in thousands, for the quarter ended) (4)

7

%

18

%

240

203

506

205

224

Clients (in thousands)

Active Brokerage Accounts

7

%

1

%

8,639

8,552

8,510

8,140

8,072

Banking Accounts

11

%

3

%

801

780

769

745

719

Corporate Retirement Plan Participants

5

%

2

%

1,516

1,492

1,462

1,439

1,444

(1)

Excludes all proprietary money market, equity, and bond funds.

(2)

Includes inflows of $7.5 billion in Investor Services from the
acquisition of optionsXpress Holdings, Inc. in the third quarter of
2011.

(3)

Includes inflows of $12.0 billion and $60.9 billion from mutual
fund clearing services clients in the first quarter of 2012 and
third quarter of 2011, respectively. Includes outflows of $2.1
billion from a mutual fund clearing services client in the first
quarter of 2011.

(4)

Includes 315,000 new brokerage accounts from the acquisition of
optionsXpress Holdings, Inc. in the third quarter of 2011.